Comments Off on Budget 2016: LV cries foul at George Osborne's plan to hike insurance tax

LV, the UK’s biggest mutual insurer, has slammed a proposed hike in a controversial insurance tax, warning it will penalise customers for insuring their valuables.

Chancellor George Osborne is mulling plans to raise the Insurance Premium Tax in Wednesday’s Budget from 9.5% to 12.5%.

LV boss Mike Rogers said customers would bear the brunt of any increase and urged the Treasury not to raise the tax, which was hiked from 6% to 9.5% in November.

“It will increase the financial burden for millions of responsible households,” Rogers said. “It is not a tax on insurance companies — it’s a tax on insurance products which is paid directly by customers, effectively penalising them for doing the right thing and protecting the things they value most.”

The Association of British Insurers has estimated the tax — levied every time someone buys an insurance policy in the UK — will add £13 to car insurance policies and £10 to building and contents insurance on average.

LV, founded as Liverpool Victoria in 1843, paid out another £27 million to its half a million life insurance policy holders last year, up from £24 million last year. Customers will see 1% of the value of their policy added onto its value this year.

Group operating profit rose £195 million for the year ending December from £86 million in 2014.

But the firm, which sponsors rugby’s LV= Cup and county cricket, reported a slight dip in general insurance profit due to £36 million of costs associated with December’s flooding across the North of England. Operating profits in the division were £72 million, down from £92 million in 2014.

Life insurance bounced back though, reversing a £7 million loss to swing to a £41 million operating profits thanks to pension freedom changes.